Cash needs requirementCash needs requirement

Cash needs requirement

(2) The licensee must:
(a) prepare a projection of the licensee’s cash flows over at least the next 12 months or, on or before 30 June 2020, 3 months, based on the licensee’s reasonable estimate of what is likely to happen over this period; and
(b) have the projection approved in writing at least quarterly by the following persons as satisfying the requirements of paragraph (a):
  (i) if the licensee is a body corporate—the directors of the licensee; and
  (ii) if the licensee is a partnership or the trustees of a trust—the partners of the licensee or the trustees; and
  (iii) if the licensee is a natural person—the person; and
(c) document the calculations and assumptions used in preparing the projection, and describe in writing why the assumptions are appropriate; and
(d) update the projection of the licensee’s cash flows if:
  (i) the projection ceases to cover at least the next 12 months or, on or before 30 June 2020, 3 months; or
  (ii) there is reason to suspect that an updated projection would differ materially from the current projection or show that the licensee was not meeting the requirements in subparagraphs (e)(i) and (e)(ii); and
(e) document whether, based on the projection of the licensee’s cash flows, the licensee:
  (i) will have access when needed to enough financial resources to meet its liabilities over the projected period of at least the next 12 months or, on or before 30 June 2020, 3 months; and
  (ii) will hold at all times during the period to which the projection relates, the amount of cash that the licensee is required to hold under paragraph (f);
(f) hold in cash an amount of at least 5% of the greater of:
  (i) the cash outflow for the projected period of at least the next 12 months or, on or before 30 June 2020, 3 months, adjusted pro rata to produce a cash outflow for a 12 month period if the projected period is not 12 months; and
  Note: For example, if the cash outflow for a projected period of 3 months were $100,000, the cash outflow for a 12 month period would be $400,000.
  (ii) the licensee’s actual cash outflow for the most recent financial year of at least 360 days for which the licensee has prepared a profit and loss statement.